Futures Indicate Stronger Open
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15
AM
BONDS -6 — It would have
seemed like the bonds should have come into the session today supported by the
weak action in the equity market last Friday, but it is also possible that thin
conditions are keeping the bonds from getting the full bullish impact off the
economy. There is also a fear that the US Treasury market will see a significant
expansion of supply, in the event of a war and that is initially weighing on
bond prices this morning. Some traders might fear the
US
numbers to be released this
morning, but we think the odds are good that the
9:00
numbers will offset each
other.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +340,
NIKKEI
-135, FTSE +31 — With a major pharmaceutical company confirming forward
guidance overnight, US stock prices seem to be getting a little lift into the
opening this morning. It is also possible that the stock market sees a little
benefit from the speculation that a war with
Iraq
might
not take place until late in February. With the Dollar expected to remain under
pressure, it is clear that investors are either avoiding the
US
market,
or are actually rotating away from existing US holdings.
FOREIGN
EXCHANGE
DOLLAR:
The overnight Press is reporting that war fears are weighing on the Dollar and
that simply joins the fear toward the
US
economy, to keep the Dollar mired in weakness. However, providing some support
to the Dollar this morning, were comments from a German Ministry of Finance
official who was commenting on what Euro exchange rate would hurt German
exports. The trade is evidently concerned that another war with
Iraq
, on top
of a slack economy, will result in the
US
taking
on massive debt. The market is in effect running away from US denominated
investments. Even with recent
US
economic reports showing slightly better readings than were expected the Forex
trade is no about to change its mind on the Dollar.
With both BOJ and ECB officials at least broaching the subject of exchange rates
hurting their economies, it seems unlikely that any action will be taken in the
near term. Therefore, we expect the Dollar to continue to slide, even if the
US
numbers
today are favorable. Near term downside targeting in the March Dollar comes in
at 102.00.
EURO:
As suggested before, the German Finance Minister, Eichel
apparently speculated that at some point, a soaring Euro might begin to damage
German export activity, as well as exports from other EU members. Supposedly Eichel
was “comfortable” with the Euro moving above parity and in fact
suggested that the Euro continues to trade within the region of parity and that
would seem to suggest that EU officials haven’t seen the currency move outside
of an acceptable range. We suspect that the Euro will make more gains against
the Dollar, unless the US Purchasing managers is weak and then a massive rise
might be seen in the Euro this week. We still think that traders can expect
significant upside ahead in the Euro. Many suspect that the Euro is going to
find 105.00 as support, instead of resistance.
YEN:
We have to think that significant growth readings in
China
are a
positive to the Japanese economy and that might have helped the Yen into new
high ground overnight. In fact, without suggestions from the
BOJ that intervention is coming, the Yen might rise all the way up to and
through the November high of 84.21. Supposedly Japanese exporters are poised
around the Y120 level and that could mean significantly upward volatility
sometime later this week. Near term support comes in at 83.72.
SWISS:
While gold isn’t exactly soaring, sentiment is pretty negative toward the
US
and
energy prices are higher and that should bode well for the Swiss. Therefore, we
suspect that the Swiss is primed to forge a move to new high ground. Near term
support in the Swiss comes in at 71.56, buy breaks to that level.
POUND:
We have to wonder when the
UK
economy
will be held to the same negative impact of war, as the
US
economy
is being held to. We have to think that the Pound would already be into new high
ground if it were not for the war threat. With
UK
lending
readings down and business failures rising to an 8 year high in 2002, there is a
risk of being long the Pound from current levels, especially with a war threat
looming. Therefore, we have to think that risk outweighs reward in being long
the Pound from current levels.
CANADIAN:
It is clear from the Canadian chart, that the
Canadian is coming under the spell of the
US
illness. Given the technical damage on the charts, expect to see a slide to at
least 63.00 and possibly even 62.70 basis the March
contract. Even with a decent monthly payroll on the horizon, the C$ won’t be
able to shake
US
influence.
METALS
OVERNIGHT
CHANGE to 4:15 AM: GLD -0.50,
SLV +2.7, PLAT +8.40,
CP +.45; London Gold Fix
$348.50, +$.20; LME Copper Warehouse
stks
855,600 ton, -175 tons; Comex Gold stocks 2.04 ml, -100
oz; COMEX Silver stks 107.3 ml oz, Unchanged;
OVERNIGHT: Even numbered resistance of $350 seemed to hold gold back overnight
GOLD:
As expected, the weekly COT report did show a net spec long position in excess
of 100,000 contracts, as that position came in at 108,000 contracts net long.
With the gold seeing support from a number of fronts, it will probably avoid
steep corrections, but it is possible that the war threat mitigates in the weeks
ahead. An article in a UK Newspaper is suggesting that a war with
Iraq
probably
won’t start until February 21st and that is the second such forecast in less
than a week, that is suggesting war with
Iraq
won’t
start until late February.
SILVER:
The silver market showed a net spec long position of 53,000 contracts, an
addition of roughly 3,000 contracts in the last week. We would still not suggest
that silver is without further buying capacity, even if it is slightly
overbought. However, we might feel a little more confident in the long side, if
March silver were to climb above a critical pivot point up at $4.752 today.
PLATINUM:
Given the aggressive spike up in platinum overnight it would also seem like
platinum has once again embraced the flight to quality focus after a couple
weeks of trade in which is appeared to be tracking the stock market. Maybe the
fact that
Russia
expelled
the Peace Corps and charged some members with spying is an issue for platinum.
The weekly COT report showed platinum to have a net spec long of 4,500 longs but
that position actually contracted in the last week leaving platinum in a
positive position for the upcoming week’s action.
COPPER:
If the
US
economy
could garner any footing whatsoever, the copper market could easily be driven
higher by the economic activity in
China
, as
China
produced
an 8% growth rate in the most recent quarter. However, the copper market will
continue to have a slight negative tilt because of the sloppy action in US
stocks, concerns for war and fears of slowing growth in the US. However, the low
last week, might be a temporary support zone,
especially with the copper showing a net spec liquidation of 9,200 contracts in
the latest COT report.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM:
CRUDE +36, HEAT +97,
UNGA +65 — With the US deploying another battle group late last week,
it would seem that the US is progressing toward war and that should keep the
energy market supported. The weekly COT report showed the crude oil net spec
long, to be almost 97,000 contracts long, which is a much bigger net spec long,
than we expected to see in the report.
NATURAL
GAS
The
natural gas market might begin to feel the effects of warmer than normal
US
temps but that impact might
be mitigated by solid support from the regular energy complex. It feels like the
natural gas will have to have a warmer than normal winter, thrust down its
throat before the longs throw in the towel.